SBA Bond Guarantee detail

SBA Bond Guarantee Program – A Great Tool in Increasing Bonding Capacity

08/11/2021 Written by: Nick Newton

Anyone working in the construction bond industry has seen the scenario where a client or prospect is requesting bonding capacity larger than the standard surety market is willing to provide. While some sureties will utilize tools like escrow or collateral, the SBA Bond Guarantee Program offers an alternative solution, enabling greatly increased capacity for your client. 

The SBA guarantees 80% of the bond obligation to the surety; 90% for firms that are minority-owned, veteran-owned, and service-disabled veteran-owned, 8(a) and HUBZone certified, and all contracts $100,000 or less. This reduced exposure makes it more palatable for the 42 sureties that participate in the program to offer increased bonding capacity.

Program highlights include:

  • Quick Program for bonds up to $400,000.
  • Approval up to $6.5 million bond, $10 million on federal projects with contracting officer certification to the SBA.
  • SBA will approve bonds up to 20x working capital, provided project is no larger than 2x previous largest.
  • Available balance under a bank line is added to working capital for determining bond size.
  • Principal cannot have a current bankruptcy, must be current on taxes, and not have outstanding collections issues.
  • Maintenance guarantees cannot exceed 2 years, unless statutory in nature.
  • There must be a written bond requirement.
  • Business eligibility determined by 5-year average of annual sales.
  • Financial requirements vary based on the size of the bond:
  • Up to $1 million – in-house financials accepted
  • $1 million - $2 million – in-house financials with aging schedules or CPA compilation
  • $2 million - $6.5 million – CPA review
  • Over $6.5 million – CPA audit
  • Submissions done electronically, with greatly reduced paperwork requirements and greatly enhanced service responses.
  • Electronic signatures accepted on required SBA forms.

How does this work? If a submission to a surety results in an offer involving SBA Bond Guarantee, the agent will resubmit to the SBA with additional required SBA forms. Upon approval, the principal will be required to pay the SBA fee online at The fee is .6% of the contract price. Upon fee payment confirmation, the SBA will send final approval to issue the bonds.

At AssuredPartners we know surety and have expertise in working with the SBA Bond Guarantee Program. We are ready and prepared to help your customers increase their bonding capacity, so contact us today to discuss how we can offer solutions to your surety setbacks.

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